Report 440: Financial benchmarks, released by ASIC yesterday, provides an insight into the corporate regulator's ongoing investigation into financial benchmarks.
ASIC listed the following benchmarks as having "potential systemic importance" in Australia: the bank bill swap rate (BBSW), the offical cash rate, the ASX 200 equity index, the ASX Clear (Futures) Commonwealth Government Securities yields survey, and the consumer price index (CPI).
The BBSW has attracted the most attention from ASIC in recent years, with all four banks currently under investigation by the regulator.
ASIC chairman Greg Medcraft recently castigated the banks for their "overly legalistic approach" to the regulator's requests for information.
"Dealers are encouraged to review their internal arrangements thoroughly to ensure that conduct issues relating to financial benchmarks do not occur in the future," ASIC said.
"Internal arrangements include compliance systems, controls, procedures, policies, governance and senior management oversight arrangements, as well as incentive structures.
"We also encourage dealers in relevant markets, including fixed income and FX markets, to proactively review past conduct to ensure there has been full compliance with the law, and to report to ASIC where required," said the report.
Mr Medcraft, who is also the chair of the International Organization of Securities Commissions (IOSCO), is keen for Australian institutions to adopt and implement IOSCO's financial benchmark principles.
"We also encourage administrators of non-systemically important benchmarks to adhere to the IOSCO principles in a proportionate manner that reflects the size and risk of the benchmark and the benchmark-setting process," said ASIC.
"Wealth managers, including superannuation funds, insurers and their fund managers, and other clients of dealers (including ADIs), should engage with their dealers to ensure they understand how their dealers have handled (and are handling) their orders and confidential information.
"To the extent that wealth managers also administer benchmarks, our recommendations for benchmark administrators will also be relevant," said the report.
